Competition in the global network service provider market is intense. The growing interconnection of providers' networks is diminishing the importance of coverage as a differentiator, and shifting the focus to the value-added service portfolio and customer experience.

What You Need to Know

The global network service provider (NSP) market remains highly competitive, with additional pressure from regional sourcing options. This is good news for enterprises, because, when combined with competitive purchasing strategies, it ensures continued downward pressure on pricing (of as much as 10% to 15% per year, depending on service and geography), which we expect to continue for at least the next three years, as well as the opportunity to gain more-favorable commercial terms.

The increasing use of partnerships and network-to-network interconnects (NNIs) is gradually diminishing the importance on ownership of network assets; however, such arrangements are seldom entirely equivalent to a single network solution, and enterprises need to focus on the outcomes, especially SLAs, when comparing providers with different quantities of their own infrastructures.

Multiprotocol Label Switching (MPLS) and Internet virtual private networks (VPNs) have been joined by Ethernet services as the standard portfolio of underlying transport services. Overlaying these services are an ever-broadening array of value-added capabilities, with WAN optimization, managed LAN, cloud (infrastructure as a service) and SIP trunking joining hosted Internet Protocol (IP) telephony, unified communications, remote access, telepresence and security services. While few organizations will take all of these services from a single provider, global NSPs are gaining credibility in supplying these strategic services.

The providers in this year's Magic Quadrant are unchanged from the previous edition. Taken together, with the option of using regional providers, especially as enterprises centralize their IT into fewer larger data centers, this ensures a fiercely competitive market. Reaping the benefits of this environment, however, will still require enterprises to maximize leverage through competitive sourcing practice.

This year saw the gradual evolution of the largest network deals, with the trend away from classical "your mess for less" outsourcing, where the client's existing assets, staff and services were transferred to a provider and run with little change, toward deals built from a collection of standardized managed-service components, with a minimal professional service wrapper and little or no transfer of assets, existing contracts or people. This trend is increasingly blurring the lines between outsourcing and managed service sourcing approaches. The use of these standard managed service building blocks is driving lower costs and better scalability, but does require enterprises to be prepared to accept off-the-shelf offerings that are "good enough," rather than insisting on custom solutions, where they specify every detail.

A growing focus of competitive differentiation has moved to value-added service portfolios and service quality. Transport services, like MPLS and voice, are the core services for this Magic Quadrant, but these are typically sold as part of a managed service bundle. Such a bundle normally includes managed routers, and often will include additional services like managed security services, managed LANs and WLANs, and hosted IP telephony. Managed video communications, especially telepresence, and managed WAN optimization services have now become expected, and the frontier areas for managed services are managed unified communications and "infrastructure utility" services. Increasingly, these managed services will be delivered with end-to-end SLAs. Growing interest in services like Session Initiation Protocol (SIP) trunking and enterprise video means that WAN services will become an even stronger point of account control for providers that establish credibility through service execution.

Enterprise networking has been a horizontal market, with most providers interested in winning clients from any industry sector. However, we are seeing strong growth in vertical industry solutions, with many providers offering unique value-added solutions for a handful of sectors, such as ultra-low latency networks for the financial trading community or content distribution and management for the media sector. We expect this vertical approach to become an area for increasing differentiation.

Enterprises should focus on the critical capability to integrate network elements successfully from different sources into an end-to-end solution. Enterprises should look for seamless SLAs and global account and service management, preferably following ITIL standards, as well as a track record and references of successful delivery. Portals giving online visibility and control over many aspects of the solution are an increasingly important tool to deliver this end-to-end experience.

The capability to provide portal-driven reporting and control, and help enterprises manage costs continues to grow in importance. Many providers have launched services like managed mobility and telecom expense management (TEM), which are directly covered in Gartner's communications outsourcing and professional services Magic Quadrant. They are important proof-points of a provider's willingness to deliver services involving third parties. Although fixed-mobile convergence offerings are emerging, outside of North America the mobile service market continues to be a distinct market, which Gartner covers in separate Magic Quadrants.

In addition to traditional voice services, it is highly desirable for providers to offer value-added networking services, including, but not limited to, application-fluent networking, managed LANs, hosted or managed IP telephony, unified communications and managed security services. Integrators, virtual operators and carriers are included, but only if they provide and manage offerings that include data networking and converged services.

Our emphasis is on a vendor's service quality, pricing and track record. These elements are particularly important for global networks because the issues of infrastructure, language and cultural problems become more complicated and prolonged than if applicable to only one country (see Table 1).

We look for a thorough understanding of what clients want in a global provider, which is different from the requirements of a domestic provider, because it inevitably includes third-party elements, and frequently includes a wider set of managed services. NSPs should have a clear and evolving geographic strategy to meet the changing needs of customers. The portfolio should be broad enough to satisfy the evolving requirements of most enterprises, not just a specific vertical industry or customer size (see Table 2). While not prescriptive, visionary providers should have a clearly articulated strategy and market traction in areas like cloud computing, unified communications and emerging transport options like virtual private LAN service (VPLS).

Leaders have a full portfolio of voice and data products, coupled with above-average service and support, wide global coverage and competitive pricing. They have a strong vision that includes adopting more information and communication technology (ICT) capabilities, which is a strategy they articulate clearly and openly.

Challengers exhibit good capabilities in the areas of service and support, pricing and coverage. However, long-term plans are sometimes vague. They may not understand the requirements of enterprises or the market, but what they offer tends to be good quality.

Niche Players are often strong in a specific element of execution (such as service and support) or part of the product portfolio, or they offer low pricing. However, they usually lack comprehensive vision and resources.

AT&T combines broad geographic coverage, a strong product portfolio and financial stability to achieve a strong position in the global network service market. Although strongest for clients with substantial U.S. market needs, AT&T is willing to bid for networks with little or no U.S. content. However, it remains selective about the clients it will pursue, principally addressing larger enterprises for which it will offer a variety of sourcing options, from basic transport through managed services to full outsourcing. Multinational organizations with U.S. locations should strongly consider AT&T for global network services.

AT&T lacks the deep in-country infrastructure in major markets outside the U.S., such as the U.K., France and Germany, of some of its competitors, affecting its pricing and service delivery for networks needing substantial density of sites in these markets.

Customers may need to migrate within the AT&T MPLS product portfolio (AVPN, EVPN, PNT) to take advantage of offers like SIP trunking. While AT&T has developed migration tools to minimize disruption, customers may experience some disruption due to reprovisioning.

BT Global Services has begun the process of rationalizing its heterogeneous network infrastructure and has stabilized its organizational structure. As a result, reports of customer dissatisfaction have significantly reduced. BT is strongest when addressing larger managed-service opportunities, where its extensive footprint can be brought to bear. It is also very focused on capturing a greater proportion of its customers' networking and IT infrastructure expenditures.

BT Global Services has an extensive global MPLS network, with additional networks in the U.K., several Western European countries, India and South America.

BT has a broad portfolio of managed service options, from application-aware networking, through security and data center services, to LANs, including managed video communications where BT is a market leader..

BT has developed a particularly strong focus on certain vertical sectors, including financial services, consumer packaged goods, government and healthcare, and global commerce.

Although making progress in the rationalization of its global networks and service portfolio, BT still has multiple networks and service portfolios, resulting, for example, in different prices, service levels and service management capabilities, depending on the network used.

BT is behind other leading global providers in a number of areas, including Ethernet services.

Some Gartner clients outside the U.K. have reported a high level of churn in their delivery teams, leading to inconsistent service.

Cable&Wireless Worldwide is now separated from Cable & Wireless Communications (which operates incumbent telecom operators in a variety of smaller markets), allowing it to focus on serving the communications needs of large enterprises. However, it's very U.K.-centric, with many of its offerings only available in the U.K. Cable&Wireless is at its best where the enterprise needs services in major global markets, rather than deep capillarity in a particular market (apart from the U.K.). Enterprises that need managed services in the U.K. and/or Asia/Pacific, and in the major global markets, as opposed to deep capillarity in multiple regions, should consider Cable&Wireless.

Cable&Wireless' MPLS network covers the largest markets in the world, with especially strong coverage in the U.K., India and the Asia/Pacific region. This is combined with a large number of NNIs, to cover smaller markets.

It is innovative and flexible in terms of the solutions it offers and the commercial arrangements it is prepared to construct, including a willingness to aggressively compete on price.

Global Crossing has focused on being the primary provider to midsize multinationals, or a secondary provider to the largest multinationals. While executing well on the basics in its core markets, Global Crossing is still challenged by the need to simultaneously expand its coverage into emerging markets and enhance its managed-service portfolio. It is making some progress in this regard, opening additional data centers and acting as the networking partner for the telepresence vendor Teliris and also as a telepresence partner for Cisco. Global Crossing should be considered by midsize multinational enterprises seeking connectivity or basic managed services where needs are primarily in the U.S., Western Europe and South America.

NTT Communications (NTTC) has very little brand recognition in the global NSP marketplace, although its network is strong in Asia/Pacific and reaches the top markets elsewhere. In addition, NTTC provides managed services for many enterprises on top of other providers' networks, and gains excellent feedback for the quality of these and the other services it provides. NTTC's parent company, NTT, has acquired network-centric system integrator Dimension Data, providing NTTC with the opportunity to significantly improve its offerings, provided it can successfully integrate Dimension Data's capabilities with its own. However, NTTC's previous acquisitions, such as Verio and Integralis, have tended to be kept at arm's length, resulting in a dilution of the potential benefits.

NTTC should be considered for networks with considerable coverage needs in Asia/Pacific, and where high quality is a priority. Enterprises needing high-quality services, with strong coverage of Asia/Pacific markets, should consider NTTC.

NTTC's network coverage and in-country sales and support outside of the Asia/Pacific region continue to be significantly less extensive than those of the Leaders in this Magic Quadrant.

NTTC is not generally cost-effective for networks without an extensive Asia/Pacific component.

NTTC has a complex organizational structure. Its strong data center offerings are not well-integrated with its networking offerings, and there are distinct differences in its approach in different geographies.

Orange is able to serve enterprises with the broadest scope needs thanks to its leading geographic coverage, combined with a broad service portfolio. Orange focuses on delivering managed services, rather than basic connectivity, and although it will undertake network outsourcing, it tends to be quite cautious in pursuing these types of engagements. Orange has developed a number of very innovative solutions in the French domestic market, including vertical industry offers in a number of sectors. However, like many operators, it has only managed to globalize a small fraction of these offers. Orange Business Services should be considered for most global networking requirements where a managed service approach is required.

Orange Business Services has the broadest geographic network reach of any provider in this Magic Quadrant, with special strength in France, Poland and Russia, and a growing position as a regional operator in Africa.

Gartner clients rank Orange Business Services very highly for the quality of its network services.

In addition to having a very broad portfolio of managed network and data center services, Orange is growing its ICT business, with offerings such as VPN Gallery for cloud services. It's also trying to globalize solutions in areas such as machine-to-machine communications, which it has developed for the French market.

Apart from France, Poland and Russia, Orange Business Services lacks its own deep national infrastructure in the major markets, such as the U.S., the U.K. and Germany, and has been less willing than other providers to exploit the assets of other Orange group companies or use NNIs, limiting its ability to deliver cost-effective, high-capacity transport services in these markets.

Reliance Globalcom positions itself as offering a hybrid VNO approach to enterprise networks; however, with its own global backbone network and about the same number of access partners as the other global providers, its approach is not fundamentally different from the other providers on this Magic Quadrant. However, the ability to combine low-cost sourcing of network access, especially DSL, with its own long-haul capacity can result in very cost-effective networks, especially when deep in-country coverage is required.

Reliance is combining its global business with its domestic Indian enterprise business, which will give it better access to Reliance's infrastructure in India and shared/hosted services developed in India, including data center services. Enterprises requiring a large number of branch sites in multiple countries should consider Reliance Globalcom.

Gartner clients continue to report service delivery issues with Reliance Globalcom, and Gartner is aware of Reliance Globalcom customers seeking alternative suppliers as a result of service-level agreement (SLA issues.

Reliance is reluctant to accept commercial terms, such as benchmarking clauses, appropriate to its status as an infrastructure-owning operator with limited partners, preferring its active negotiation process, which can result in customer dissatisfaction with price controls during the lifetime of the deal.

Its offerings in a number of areas beyond the converged WAN, such as fixed and mobile voice, managed LANs and unified communications, are still immature.

Although still often thought of as an IT service company, T-Systems has been strengthening its networking business, both network outsourcing and managed network services, such as MPLS. T-Systems is benefiting from the convergence of IT and network services, and is even offering a growing portion of its IT, as well as its networking services, in a unitized subscription manner, rather than classical outsourcing. The company should be considered by enterprises that have significant requirements for managed and professional services as part of their deals, and whose requirements are weighted toward Europe, where T-Systems' infrastructure is strongest. T-Systems also has a number of vertical industry offerings in sectors such as healthcare and automotive, many of which are linked to its networking offers.

Although growing, T-Systems' own network is significantly smaller than those of leading facilities-based competitors.

T-Systems' portfolio of standard network-related managed services is more limited than its leading competitors.

Outside Germany, the company has lower marketing visibility for its network services than for its IT services. As a result, T-Systems is often overlooked for network-only deals, which limits its growth potential.

The company's offerings can appear to be expensive, especially for basic network deals, due to the tendency to include additional professional services.

Tata Communications is gradually extending its portfolio, building upon its extensive undersea cable assets. While it has developed a number of innovative service offerings, it is still limited in its continental coverage and on-site service options. As a result, Tata Communications is best placed to address networks needing a small number of connections (especially high-speed connections) in the major markets, and/or needing deep coverage in India, South Africa or the Middle East.

Tata Communications' extensive network of undersea cables give it the ability to deliver high-capacity services, especially Ethernet service, to the major markets at very competitive prices.

The company's significant point-of-presence (POP) density in India, extensive presence in the Middle East and growing coverage of Africa (including majority ownership of Neotel in South Africa) make it especially attractive for enterprises seeking coverage in these regions.

Outside of India and South Africa, Tata Communications lacks deep in-country infrastructure. Network coverage is especially limited in regions such as South America and Central and Eastern Europe, with coverage in these regions principally provided by partnerships, making Tata less competitive for networks requiring dense coverage of these markets.

Tata Communications' managed service portfolio trails that of its larger rivals in areas such as unified communications.

While Tata is a well-known brand, it is not strongly associated with the telecom market; therefore, Tata Communications struggles to gain mind share with large enterprises.

Telefonica Multinational Solutions, the business unit addressing multinational enterprises, comprises both its own resources and matrixed resources from Telefonica's various operating entities around the world. As a result, many opportunities have to be addressed by pulling together custom solutions. Starting with large outsourcing deals, this unit has now evolved to address managed network service opportunities. Telefonica Multinational Solutions should be considered by enterprises requiring large managed service networks or network outsourcing, especially where strong coverage of the America's and Western Europe is required.

Its financial position is strong and includes investments in other operators, such as China Unicom and Telecom Italia, which could be leveraged in the future for global capabilities, although, at present, these have little direct impact on its ability to deliver global enterprise networks.

Telefonica Multinational Solutions has yet to industrialize and globalize all of its offerings, still making extensive use of custom solutions. This particularly affects areas such as data center services.

Its network footprint and sales coverage are limited outside Europe and the Americas.

Telefonica has limited brand awareness in the enterprise market outside Latin America and Southern Europe, although its O2 brand is recognized in a number of European markets, including the U.K. and Germany.

Verizon has strengthened its position in the global market, improving its coverage of emerging markets, adding a solutions layer to its extensive array of point products and improving the customer experience, especially through enhanced portal capabilities. It is also making headway in network outsourcing. Unlike many of the other network service providers in this research, Verizon should be considered by a wide range of enterprises, from those with small networks, to those with large networks and those seeking sourcing models from high-capacity transport through managed services to full outsourcing. Networks requiring extensive coverage of emerging markets, however, remain a challenge.

With its own fibre networks in major countries worldwide, including metropolitan networks in the major cities, Verizon has been able to offer very attractive pricing, especially for high-capacity services, such as Ethernet.

Verizon continues to gain mind share in SIP trunking, both domestically and internationally, with a combination of sales, marketing and engineering execution.

The company is continuing to broaden its already extensive array of managed and data center services, with offerings in areas such as security, managed mobility and application assurance, supported by a very strong portal capability.

Verizon has been improving its network presence in smaller markets and emerging regions, such as Eastern Europe, the Middle East and Africa, but is still behind some other providers in this regard.

Compared with other leading NSPs, Verizon is not as strong at partnering with other industry players, ranging from other operators to IT service companies.

Gartner customers continue to report a lack of communication between Verizon's different organizational units, such as project management and operations, resulting in inconsistent performance at hitting installation dates, especially for Ethernet services.

We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope may change over time. A vendor appearing in a Magic Quadrant or MarketScope one year and not the next does not necessarily indicate that we have changed our opinion of that vendor. This may be a reflection of a change in the market and, therefore, changed evaluation criteria, or a change of focus by a vendor.

Evaluation Criteria Definitions

Ability to Execute

Product/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes current product/service capabilities, quality, feature sets, skills, etc., whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria.

Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood of the individual business unit to continue investing in the product, to continue offering the product and to advance the state of the art within the organization's portfolio of products.

Sales Execution/Pricing: The vendor's capabilities in all pre-sales activities and the structure that supports them. This includes deal management, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel.

Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message in order to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional, thought leadership, word-of-mouth and sales activities.

Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements, etc.

Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.

Completeness of Vision

Market Understanding: Ability of the vendor to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen and understand buyers' wants and needs, and can shape or enhance those with their added vision.

Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the website, advertising, customer programs and positioning statements.

Sales Strategy: The strategy for selling product that uses the appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base.

Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature set as they map to current and future requirements.

Business Model: The soundness and logic of the vendor's underlying business proposition.

Vertical/Industry Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including verticals.

Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market.